Our Blog

Month: November 2014

The new approach to compliance is well illustrated by the latest campaign – the Credit Card Sales Campaign, which began in October 2014.

The ‘home page’ for the campaign – www.gov.uk/creditcardsales – contains the expected ‘opportunity’ offer. In line with the most recent campaigns, no formal closing date is set here. Voluntary disclosure is invited, if:

The trader accepts card payments for goods or services (so both debit and credit cards); and

Either he has not declared all his taxable income, or has not registered with HMRC at all

There is the, by now standard, two part process. Notification is to be made at once, followed by full disclosure and payment within a few (in this case four) months.

In addition, we have a range of ‘closed’ campaigns covering property sales, outstanding VAT and income tax Returns, plumbers’ and electricians’ ‘tax safe plans’, direct selling and on-line selling, health and wellbeing, as well as offshore disclosures.

In practice, this means that vigilance is needed in all areas, as there is a heightened risk of prosecution and the certainty of higher penalties for any ‘late entrants’ discovered by HMRC.

Most companies pay corporation tax 9 months after the end of their accounting period. However, companies with profits in excess of £1,500,000 a year are required to pay corporation tax on a quarterly basis. The first 25% is due 6 months and 14 days into the period, with subsequent 25% payments due every 3 months thereafter. This can be a serious cash flow issue in the first year that it applies, although there is a one year “grace” period. The £1.5 million limit is divided by the number of “associated” companies (under common control), so if there are 4 companies this limit is just £375,000. From 1 April 2015 this rule will only apply to members of a 51% group. We can help you plan to avoid this rule applying to your companies.

There have been some intriguing listings on HMRC’s What’s New page lately – who could not be fascinated by Tariff Notice 69: Classification of a plastic tube with a length of 142 centimetres with a plastic balloon at one end or, best of all, Revenue and Customers Brief 36 (2014): VAT – Liability of Snowballs.

But the Brief is not concerned with playground battles, nor yet the festive concoction of egg flip and lemonade. Instead, it is the Great Chocolate Teacake Saga, redux. It repots the outcome of an appeal to the Tax Tribunal as to the VAT status of an edible item (to use a neutral term) marketed as “a snowball”.

The “snowballs” under consideration consisted of a dome of marshmallow coated in (any combination of) chocolate, sugar strands, carob, cocoa and coconut. Some also sported a jam filling. HMRC claimed that they were standard-rated items of confectionary.

The Tribunal agreed that snowballs were indeed “confectionery”, but went on to say that they could also properly be described as “cakes” and so were zero-rated. The Tribunal took into account not only the physical properties of the product, but also matters such as the way it was advertised and packaged, and the circumstances in which it was likely to be eaten.

HMRC have accepted this decision and will amend their published guidance shortly.

As mentioned in previous editions of this newsletter, current rules state that pension annuities lapse on the death of an individual, with no value passing to their children. In contrast, drawdown pensions can be passed on to the next generation, subject to a 55% charge on the fund. We were expecting an announcement of a reduction in this penal charge in the Autumn Statement, but the Chancellor decided to announce the change earlier than anticipated at the Conservative Party Conference. The changes will have exciting estate planning opportunities – please contact us to discuss these in more detail.

From next year, individuals with a drawdown arrangement or with uncrystallised pension funds will be able to nominate a beneficiary to receive their pension when they die.

No tax if pensioner dies before age 75

If an individual dies before they reach the age of 75, they will be able to give their remaining defined contribution pension to anyone as a lump sum. This lump sum is tax free, whether it is in a drawdown account or uncrystallised. This contrasts with ISAs and other investments, which would potentially be subject to inheritance tax.

Furthermore, the person receiving the pension pot will pay no tax on the money they withdraw from that fund, whether it is taken as a single lump sum or accessed through drawdown.

Death of pensioner after age 75

Anyone aged 75 or over dying with a drawdown arrangement or with uncrystallised pension funds will be able to nominate a beneficiary to pass their pension to. It is proposed that the nominated beneficiary will be able to access the pension funds flexibly, at any age, and pay tax at their marginal rate of income tax. There are no restrictions on amount of the pension fund that the beneficiary can withdraw at any one time. Beneficiaries will also have the option of receiving the pension as a lump sum payment, subject to a tax charge of 45% (if the deceased is over 75).

Section 22 of the Immigration Act 2014 imposes a civil penalty on landlords who let residential accommodation to illegal immigrants. A liability may also be incurred by letting agents, householders who let rooms to lodgers, and even a householder who allows a member of his extended family to stay, long term, as a non-paying guest. It will however be a defence that the landlord, etc, has carried out the required checks before letting the accommodation.

In practice, therefore, the landlord or householder will have to satisfy himself or herself that the applicant, and every other adult who will occupy the property (whether named on the tenancy agreement or not) has the “Right to Rent” by virtue of being a British citizen, EEA or Swiss national, or having been granted the right to live in the United Kingdom, either indefinitely or for a restricted time. This will mean checking, and retaining copies of, passports and other documents.

To avoid discrimination, these checks will have to be made, even if the applicant looks as British as John Bull.

The ‘Right to Rent’ requirements applies only where accommodation is to be occupied as the tenant’s or lodger’s only or main home, so will not apply to holiday accommodation. However, the Home Office guidance is that, if holiday accommodation is booked or occupied for three months or more, the hotelier or landlord should assume that the accommodation is in fact the occupier’s main residence.

The penalty will be £1,000 for a first offence and £3,000 thereafter, reduced to £80 and £500 respectively for lodgers in private households.

The ‘Right to Rent’ requirements is to be phased in area by area beginning, on 1 December 2014, with the West Midlands (Birmingham, Walsall, Sandwell, Dudley and Wolverhampton). Further details have been published by the Home Office in the Code of Practice on illegal immigrant and private rented accommodation (www.gov.uk/government/publications/right-to-rent-landlords-code-of-practice).

The Childcare Business Grant Scheme (which is available only in England) has been extended to 31 December 2014. Under the scheme, grants of £250 or £500 are paid to people setting up a new childcare business (which can include childminding in the childminder’s own home). The grant can be used as a contribution towards costs such as training and registration, Disclosure and Barring Services (DBS) clearance, health checks and certificates, and public liability insurance, as well as purchasing equipment and adapting premises.

The grant for a new childminding business (one looking after a child or children, not related to the childminder, in the childminder’s own home) is £250, doubled to £500 if either there are four or more childminders working on the premises (including the proprietor) or the childminder has incurred additional expenditure in order to provide care for disabled children.

The grant for childcare businesses operating in non-domestic premises, such as nurseries and out-of-school clubs, is £500.

The scheme also includes access (free of charge) to a business mentor. Two points to watch are that grants will not be paid to anyone already operating a childcare business of any kind, even if the money is needed to open a new nursery in new premises, and that schools may not claim a grant for breakfast clubs, after school clubs, and other childcare provided by the school on school premises.